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Oil prices fell sharply on Monday, retreating nearly 3% as signs of potential diplomatic engagement between the United States and Iran eased fears of escalating geopolitical conflict. The decline came after U.S. President Donald Trump said over the weekend that Iran was “seriously talking” with Washington, raising hopes of a negotiated nuclear agreement and reducing the risk premium that had recently supported crude prices.
Brent crude futures dropped $1.90, or 2.8%, to $67.39 per barrel by late Monday trading, while U.S. West Texas Intermediate crude also fell $1.90, or 2.9%, to $63.32 per barrel. The pullback followed a strong rally in the previous session, when Brent reached a six-month high and WTI hovered near its strongest level since late September amid heightened U.S.-Iran tensions.
Those earlier gains were driven by concerns that worsening relations between Washington and Tehran could disrupt global oil supply. President Trump had repeatedly warned of possible intervention if Iran failed to agree to a nuclear deal or continued violent crackdowns on protesters. However, sentiment shifted over the weekend after Trump expressed optimism about negotiations, saying he hoped for an agreement that would prevent Iran from obtaining nuclear weapons. Tehran also signaled progress, with senior security official Ali Larijani stating that arrangements for talks were underway.
Market analysts said the softer tone was enough to trigger profit-taking across the oil market. According to IG market analyst Tony Sycamore, traders are interpreting the comments as a step back from confrontation, easing geopolitical risks that were priced into crude during last week’s rally.
Adding to the downward pressure, OPEC+ agreed at a meeting on Sunday to keep oil output unchanged for March. The producer group had already paused previously planned supply increases through March 2026, citing seasonally weaker demand. Analysts note that ample global supply continues to weigh on prices despite periodic geopolitical shocks.
Capital Economics recently described the oil market as fundamentally bearish, warning that even geopolitical flare-ups may have limited long-term impact. With supply well balanced and demand growth uncertain, the firm expects downward pressure on Brent crude prices to persist toward the end of 2026.
